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Flexible Contracting in Project Business
University of Oulu.
Luleå University of Technology, Department of Business Administration, Technology and Social Sciences, Social Sciences.ORCID iD: 0000-0003-4176-2805
University of Oulu.
2015 (English)In: International Journal of Managing Projects in Business/Emerald, ISSN 1753-8378, E-ISSN 1753-8386, Vol. 8, no 1, p. 92-106Article in journal (Refereed) Published
Abstract [en]

PurposeThe objective of this paper is to increase our understanding of the main challenges of the contracting process and project contracts in the context of project business characterized by a high level of complexity and uncertainty. We argue that understanding contracting as a flexible process and as a business tool will contribute to creating more value in projects which are implemented in constantly changing circumstances or which require gradual and iterative development.Design/methodology/approachThis is a conceptual paper with illustrative examples from the software industry.FindingsA prevailing approach for both managing contracts and the contracting process focuses on careful planning and drafting of contracts that protect each party in the case of conflicts and disagreements. The underlying assumption is that all activities can be planned and documented in a formal contract. According to this approach, the contracting process is seen only as a bargaining negotiation and the project contract as a detailed agreement of the responsibilities and safeguarding clauses to protect one’s position in the event of conflicts and failures. However, in the context of project business characterized by complexity and uncertainty, there is a need for flexible project contracts. We suggest that there are two fundamentally different approaches to implementing flexibility in both the contracting process and the project contract: postponing the decision until there is adequate information for decision making or making decisions that allow flexible adaptation to changes during the project lifecycle.Practical implicationsWe suggest that organizations in project business should pay closer attention to how contracts are formed and how flexibility is introduced to projects. Organizations are encouraged to see contracts as a business tool, not as rigid documents which are taken into use in case something goes wrong.Originality/valueThis paper contributes to our understanding of how to adapt the contracting process to overcome challenges related to uncertainty, especially during the early phases of the project lifecycle. We provide a novel perspective on contracting as a process that extends over the lifecycle of a project and on the project contract as an agreement between parties formed during the contracting process. This perspective includes formal contract documents as well as various other documents, oral communication, commitments, actions and incidents.

Place, publisher, year, edition, pages
2015. Vol. 8, no 1, p. 92-106
National Category
Law (excluding Law and Society)
Research subject
Law
Identifiers
URN: urn:nbn:se:ltu:diva-4615DOI: 10.1108/IJMPB-10-2013-0062ISI: 000355671400007Scopus ID: 2-s2.0-84958528411Local ID: 2971f0fa-7427-47b1-90df-a9ef4a32ae1fOAI: oai:DiVA.org:ltu-4615DiVA, id: diva2:977489
Note
Validerad; 2015; Nivå 1; 20141211 (andbra)Available from: 2016-09-29 Created: 2016-09-29 Last updated: 2018-07-10Bibliographically approved

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Nysten-Haarala, Soili

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